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Why Williams-Sonoma, Inc. Shares Could Pop Another 20%

Does this analyst make a good case? Or is it just more noise from Wall Street?

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Williams-Sonoma (NYSE:WSM) gained slightly this morning after Nomura Securities initiated coverage on the home furnishings retailer with a buy rating.

So what: Along with the bullish call, analyst Jessica Schoen Mace planted a price target of $85 on the stock, representing about 21% worth of upside to Wednesday's close. So while contrarian traders might be turned off by Williams-Sonoma's price strength in recent months, Schoen Mace's call could reflect a sense on Wall Street that its market share growth potential still isn't fully baked into the valuation.

Now what: According to Nomura, Williams-Sonoma's risk/reward trade-off is particularly attractive at this point. "Williams-Sonoma's (WSM) numerous store formats, strong retail brands, and its established e-commerce presence (44% of the business) should result in continued market share growth both in the U.S. and internationally, allowing it to exceed its planned mid to high-single-digit revenue growth and low-double-digit to mid-teens EPS growth," said Schoen Mace. "Indeed, we expect above-consensus EPS in 2014 and 2015 of $3.25 and $3.70, respectively, due to continued comp results that exceed expectations, and the ability to leverage expenses." When you couple that upbeat outlook with Williams-Sonoma's rock-solid balance sheet and still-reasonable forward P/E in the high-teens, it's tough to disagree with Nomura's bullishness.